Chiron, vaccine maker that was to provide half of U.S. supply, forced to shut down British plant.October 6, 2004: 6:41 PM EDT

NEW YORK (CNN/Money) -
Public health officials predicted a flu vaccine shortage in the United States this season after Chiron Corp. said Tuesday it won't be able to make millions of doses of the vaccine due to problems at its British plant.

The drug maker's bombshell that it will not be able to ship its supply of flu shots this year presents a major problem for consumers and investors alike. CNNfn's Fred Katayama reports.

Chiron, based in Emeryville in northern California, said in a statement that it had expected to provide nearly half the U.S. supply of flu shots for the 2004-2005 season. It said it was discussing the impact of the problems with the U.S. authorities at the Food and Drug Administration and the Centers for Disease Control and Prevention (CDC).

Public health officials said plans to vaccinate millions of people this fall would be disrupted by the announcement. And on Wall Street, the news sent investors fleeing from Chiron stock.

"Clearly, the loss of the Chiron flu vaccine poses a serious challenge to our vaccine supply for the upcoming flu season," the Department of Health and Human Services said in a statement. "Our immediate focus will be on making sure that the supply we do have reaches those who are most vulnerable."

The CDC said it is convening an advisory committee on vaccines to refine its recommendations on who should get the flu vaccine this season.

Public health officials said it was important that many of those who received flu shots in the past pass up shots this year to help maintain enough supply for those at risk.

"I get a shot every year, but I probably won't this year since I'm a healthy adult," said Karen Miller, a county commissioner in Missouri and the immediate past president of the National Association of Counties. She said counties will have to be careful who will get the more limited supply of vaccine this year.

"We'll be doing what we need to educate the public," she said.

Last year, reports of children who died from the flu early in the season led to shortages of the vaccine in the United States. Hundreds of thousands of U.S. residents who wanted flu shots were not able to get them, said Laura Segal of the Trust for America's Health, a public interest health group.

She said Chiron's news may cause a run on the flu shots for the coming season. "There's going to need to be a prioritization of people who are most at risk," Segal said.

The CDC reported 152 children died of flu-related deaths during last year's flu season in the 40 states that reported results to the health agency. In addition, tens of thousands of people, mostly the elderly and chronically ill, die from the flu each year. But it was the deaths of an unusually large number of children that sparked concerns last year.

Who's at risk

The CDC's previous recommendations were for all people 50 and older to get a flu shot, as well as infants ages 6 to 23 months and women who become pregnant during the flu season. In addition, those with certain conditions or health-care providers who could spread the flu to those at risk are urged to get vaccines.

Those at risk include people with chronic heart or lung conditions, including asthma, and people who were in a hospital during the previous year because of a metabolic disorder, such as diabetes, chronic kidney disease or weakened immune system.

The British Department of Health confirmed to CNN that it suspended Chiron's manufacturing license for three months. A spokesman said problems with the sterility of the manufacturing process meant the vaccines produced could not be released for shipment.

The problems were uncovered as part of a regular inspection of the plant.

Company officials said the problem was with a relatively small amount of the vaccine that had already been prepared for the coming season.

"We believe that our confirmatory testing indicated that the problem was confined to a limited number of lots," said Howard Pien, president and CEO of Chiron. "Therefore, today's action ... is unexpected and disappointing. But we respect the regulatory authority's judgment, because we believe it's fundamentally based on concerns for safety."

Chiron supplies about 15 percent of Britain's flu vaccines, but British officials said they should be able to complete their vaccination plans.

Chiron produces vaccines at its facilities in Liverpool, as well as Marburg, Germany and Siena, Italy. But only the product from the Liverpool plant was approved for U.S. use, and that is the one that was cited by British health authorities.

Chiron has started talks with British regulators to determine the appropriate steps to correct the problems at the plant. But it said it is looking to supply vaccines for the 2005-2006 season, rather than making any supply projections for the upcoming season.

Chiron said on Aug. 26 that it would supply 46 million to 48 million Fluvirin influenza virus vaccine doses in the United States this season, starting early this month. It also planned a late-season delivery of 2 million Fluvirin doses for a national stockpile held by the CDC.

The HHS said it had about 54 million doses of flu vaccine from Chiron competitor Aventis Pasteur Inc., and another 1 million to 2 million doses of FluMist nasal spray.

Chiron also said it no longer will hit its earlier earnings guidance and now expects to earn 70 to 80 cents a share excluding special items, for 2004, or 35 to 45 cents a share on a generally accepted accounting principles (GAAP) basis.

The company had previous expected to earn between $1.80 to $1.90 a share, or $1.50 to $1.60 on a GAAP basis. That lower guidance means the company is estimating a drop in income of $206 million to $216 million due to the drug problem.

Shares of Chiron (CHIR: Research, Estimates) tumbled $7.44, or 16 percent, to close regular-hours trading at $37.98, and then it fell another 39 cents after hours. Swiss drugmaker Novartis (NVS: Research, Estimates), which owns 40 percent of Chiron, slipped 22 cents to close New York trading at $46.60 Tuesday.

Meanwhile shares of MedImmune (MEDI: Research, Estimates), maker of the less widely used FluMist nasal spray flu vaccine, rose $1.41, or about 6 percent, to close Tuesday trading at $25.78. The news also lifted Sanofi-Aventis (SNY: Research, Estimates), which owns Aventis Pasteur, leaving it up 36 cents to $37.14 in regular-hours New York trading Tuesday.